shares plunged after a judge allowed a lawsuit over whether their equipment caused the second-worst fire in California history, a case that could add billions of dollars to the debts of the bankrupt company face.
California fire investigators concluded in January that PG&E equipment did not cause the Tubbs fire, the deadliest in a series of fires that burned California's wine country in 2017. But lawyers representing fire victims strongly dispute the finding and persuaded the judge who supervised with PG & E's Chapter 1
PG&E shares on Monday closed more than 25% at a seven-month low of $ 10.67 as investors struggled with the possibility that the company could face billions of dollars in additional liability costs when restructuring in bankruptcy law.
On Monday, he cut the "buy" rating on PG&E, estimating that the fire could add $ 15 billion to PG&E's liability costs.
He said that there is "considerable risk" that a jury decides that PG&E should be held responsible for the fire given the company's continuing difficulties in operating its electrical grid safely.
"We believe that a jury trial brings a lot of other dynamics into play, especially given PG & E's history of poor security and operational culture," he said.
PG&E requested Chapter 11 protection in January, citing more than $ 30 billion in potential commitments related to a series of fires in 2017 and 2018 that killed more than 100 people. The calculation included the Tubbs fire, which killed 22 people and burned nearly 37,000 acres mainly in the counties of Napa and Sonoma.
As the company was preparing for bankruptcy, California fire investigators determined that a private electrical system ignited the Tubbs fire, saying it found no evidence that PG&E had violated state law.
Now, attorneys representing fire victims and insurance companies say they have evidence to prove that PG & E's equipment was involved in the fire.
a trial lawyer representing the victims of the fires in 2017 and 2018 said the state investigation into the Tubbs fire failed to assess video evidence and other information indicating that the fire may have been fired by PG&E equipment. He said he expects a trial within five months and plans to join other attorneys to prepare further evidence.
"We're going to fix everything," he said. "All cards related to Tubbs should look up on the table."
PG&E in a statement Friday said it stands by the state investigators' findings.
"Regardless of the next legal steps, Cal Fire has already determined that the cause of Tubbs Fire 2017 was not related to PG&E equipment," the company said.
The lawsuit complicates PG & E's attempt to devise a restructuring plan with the goal of coming out of bankruptcy in less than a year. California lawmakers last month passed legislation to create a fund that helps the state's biggest tool to handle discharge costs in the future. PG&E is required to go out of business by June 30, 2020 to participate in it.
PG&E has said it intends to file a restructuring plan of September 9. The judge who oversaw the bankruptcy case last week affirmed the company's exclusive right to create the framework that bondholders and insurance companies pushed to submit their own plans.
founder of PG&E bond owner DG Capital Management, said: “This is a disappointment for investors. Two Cal Fire teams stated that PG&E has no responsibility for the Tubbs fire. … This adds more uncertainty to the process. There is a chance that the jury may award a high number of claim applicants. ”
PG&E's 6.05% senior notes due in 2034 are more than $ 0.10 to $ 0.10 on Friday, according to MarketAxess.
—Soma Biswas contributed to this article.
Write to Katherine Blunt at Katherine.Blunt@wsj.com
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